Iraq Situation Report, Part II: Political and economic developments

Editors’ Note: Brookings senior fellow Kenneth M. Pollack traveled to Iraq from March 9 to March 19 with Michael Knights of the Washington Institute for Near East Policy. The trip was sponsored in part by the Atlantic Council’s Task Force on the Future of Iraq. They had extensive meetings in Baghdad, Sulaymaniyyah, and Irbil with Iraqi, Kurdish, American, and British officials. This is the second of a three-part survey on the situation in Iraq. (Read the first here.)

Persistent political paralysis

As has too often been the case in Iraq, progress in the military sphere is not being matched by equivalent (or even commensurate) political progress. I continue to see Prime Minister Haider al-Abadi as a decent, intelligent man who wants to take Iraq in what I consider to be the right direction: toward ethno-sectarian reconciliation, more efficient government, and a more balanced foreign policy (or at least reduced foreign influence in Iraq). He continues to make smart moves in the military sphere, he has taken some important steps to decentralize power to the provinces, and his desire for a more technocratic and less political (or cronyist) government is laudable. However, his government continues to have little to show for all its good intentions, and that is costing the prime minister support in a variety of quarters.

[Abadi’s] government continues to have little to show for all its good intentions.

Unfortunately, the prime minister has undermined his own courageous efforts several times by mishandling the politics of important programs. He failed to consult with key Iraqi powerbrokers before announcing his reform agenda at the end of last summer, and so got little buy-in for his proposals. He made the same mistake several weeks ago, suddenly announcing a cabinet reshuffle, only to find that effort similarly sandbagged and beset by Iraq’s various political parties, especially rival Shiite groups.

He continues to operate with an inordinately small staff that, while very able man-for-man, lacks the manpower to drive Iraq’s elephantine bureaucracy. That staff is working primarily on a series of long term political and economic reforms which seem extremely intelligent, creative, and necessary. (While I heard descriptions of these reforms, I did not see any of the plans themselves, let alone anything indicating how and when they would be implemented. So while they sounded like exactly what Iraq needs, I cannot state unequivocally that I know what they will entail or even that they are more than just a theoretical program) Moreover, because these reforms are designed to address Iraq’s deep, structural problems, they will inevitably take a long time to begin and show results. There is a real danger that even if they prove to be as perfect as they sound, they may come too late to address Iraq’s (and Prime Minister Abadi’s) pressing, current problems.

These circumstances have opened the door to Abadi’s key Shiite rivals. Muqtada al-Sadr is trying to usurp the prime minister’s reform platform, staging regular public demonstrations demanding that the prime minister make good on his pledges—which Sadr’s people continue to block behind the scenes. Former Prime Minister Nuri al-Maliki has moved on his own to “handle” the security problems caused by Sadr’s street protests, threatening to make Abadi look ineffectual while simultaneously backing up his own claims that he is the only (Shiite) leader who can handle the security threats that Iraq faces. Meanwhile, the Marja’iye, the Shiite clerical establishment of Najaf, evinces frustration with Abadi’s inability to enact the reforms that he has announced and that they have demanded, but it is not pushing for his replacement.

Indeed, while some extremely knowledgeable Iraqis believe otherwise, we saw little evidence that Abadi was likely to fall in the near future. Again, the Marja’iye is not happy with the situation, but they have not turned against him the way that they did with Maliki in the summer of 2014, which was the key to Maliki’s removal. None of the major parties who would have to unite to bring Abadi down can agree on a replacement. The Iranians, for their part, do not appear to be pushing a specific replacement even though they are wary of Abadi for pushing back on them several times in the past. Moreover, the United States staunchly backs Abadi, both because he is a good man in a hard job, and because it does not want to re-open Iraq’s political can of worms to form a new government (a process that could take months) in the midst of a military campaign that is finally starting to gain some traction.

Consequently, I have an unfortunate sense that Iraq is drifting toward “Lebanonization.” Indeed, this might actually represent a good case outcome for Iraq, given the potential for catastrophic military success to produce a resumption of the civil war as an alternative, worst case scenario. By Lebanonization, I mean not only the existence of a Hezbollah-like, Iranian-dominated militia with all of the problems that that entails, but the utter paralysis of the political process, which in turn paralyzes the wider governance and economic systems of the country. Inevitably, there are efforts by folks outside of Baghdad to do for themselves because Baghdad can’t do anything for them. Some of these local efforts are being encouraged and even funded by the U.S. embassy and international NGOs. But as we have seen in Lebanon, there is a very real limit to how much local action can make up for the paralysis of the organs of the central bureaucracy. It limits growth, stunts development (especially for future generations because of its impact on the educational sector) and encourages a widespread disillusionment that can be either enervating or explosive—and can shift quickly from one to the other.

As part of this debilitating process, reconciliation among Sunni and Shiite Arabs remains moribund. President Fuad Massoum has convened a committee on reconciliation to try to push the process forward, but the committee rarely meets, and when it does, it accomplishes little. Sunni leaders are pleased with Abadi’s willingness to decentralize authority and resources to the governors of Anbar and Salah al-Din provinces to help with the reconstruction of Ramadi and Tikrit respectively, but still regard it with suspicion, fearing that the prime minister is giving them that rather than seats at the table in Baghdad.

[R]econciliation among Sunni and Shiite Arabs remains moribund.

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Former Brookings Expert

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Even some of Abadi’s closest allies among the moderate Sunni leadership are becoming frustrated that there is so little tangible progress on reconciliation. Of course, the Sunni leadership remains badly fragmented (even more so than the ever more fragmented Shiite leadership), but the government makes little effort to unify them or to use proxies to negotiate on behalf of the Sunni community. As I have written previously, I believe it critical for the United States to take on that role because I do not believe the Iraqis are able to do so themselves. That point was only reinforced by my impressions from this trip.

Many Sunni and Shiite leaders (as well as many American officials) are touting “bottom-up” reconstruction—average Sunnis and Shiites living, working, and rebuilding communities together. While that is a terrific thing—both useful and probably necessary—the history of civil wars demonstrates that there are very sharp limits on what can be achieved from the bottom up if there is not a corresponding top-down effort. Without it, the bottom-up approach is likely to start running into hard “ceilings” that will divide them again, leading to further disillusionment or renewed violence. Without a broad agreement at the top regarding the basic distribution of political power and economic benefits—and so framing a vision of a future Iraq—the bottom-up approach can only go so far.

[T]here are very sharp limits on what can be achieved from the bottom up if there is not a corresponding top-down effort.

Some help for the economy?

Iraq’s financial crisis remains acute as a result of persistent low oil prices. That, plus the frustrating bureaucratic logjams and burgeoning security problems in southern Iraq (a result of the shift in Iraqi security forces to the north to battle Da’esh), have created significant headaches for the international oil companies operating in southern Iraq. Since Baghdad unfortunately insisted on contracts that left those companies with very low profit margins, the oil companies have shown less interest in investing in southern Iraq in the face of these problems.

Excluding the Kurdish region, Iraq is producing about 4 million barrels per day (mbd), with about 3.2 mbd going to exports. Baghdad expects that that will grow only to about 4.1 or maybe 4.2 mbd in 2016. Projections of 6, 9, or even 12 mbd of production—which once were common—now seem a long way off, if they are ever to be realized. Moreover, many Iraqi government officials are concerned that oil production might even begin to decline in 2017.

Iraq recently signed a contract with an Italian engineering firm to begin repairing the damage to Mosul dam. The contract was brokered and shepherded by the U.S. embassy, which believes that if the dam can last until the Italians begin work (probably in June), they should be able to avert a natural disaster of biblical proportions.

Of greatest importance for Iraq, some major infusions of cash may be just over the horizon. Iraq is negotiating with the International Monetary Fund for financial relief which, altogether could amount to more than $9 billion. In addition, the Obama administration is trying to put together a bilateral package that could be worth $1 to $1.5 billion. American diplomats will then use both to try to raise additional funds for Iraq from other members of the Counter-ISIL Coalition.

The likely prospect that Iraq will receive billions in foreign aid at some point in 2016 has greatly mitigated the sense of panic in Baghdad. In one respect, relieving that pressure was much needed. However, it threatens to eliminate support for desperately needed economic reforms, such as those that Prime Minister Abadi’s team is reportedly working on. If that turns out to be the case, it could be (yet another) important missed opportunity.

[T]here are efforts by folks outside of Baghdad to do for themselves because Baghdad can’t do anything for them.

Shifting patterns of foreign influence in Iraq

Finally, as many of the points above (and in Part I of this assessment) should have suggested, American influence in Iraq has increased in meaningful ways. Simply put, the United States is investing significant new resources in Iraq—from additional military assets to considerable financial aid to more active diplomatic and military leadership—and doing so is bearing obvious fruit. Ambassador Stuart Jones has proven himself to be an able and highly intelligent diplomat, extremely savvy but also very constructive in his engagements with the Iraqis. Brett McGurk, the Special Presidential Envoy for the Counter-ISIL Coalition, is a keen legal mind and a true problem-solver, who has earned the trust of virtually the entire gamut of Iraqi politicians in over a decade of constant engagement.

Between McGurk and Ambassador Jones’s embassy on the civilian side, and Lieutenant General MacFarland’s team on the military side, there is a real sense that—for the first time in a long time—the United States is punching at its weight, and might even be punching above it. Of greatest importance, it is the combination of skillful personnel with some real resources to work with that has enabled the United States to once again exert meaningful influence on Iraqi activities.

The change is evident in Baghdad. Iraqis no longer dismiss the United States and its wishes, as was the case from 2012 to 2015. Now, the fact that the United States wants Abadi to remain in power appears to be of real importance to Iraqis—and we heard that as a reason for why he’s likely to remain in power more often than any explanation having to do with the Iranians. Iraqis increasingly recognize that only military operations backed (if not run) by the Americans are likely to succeed, and that the formations trained by the U.S.-led coalition are unquestionably the best in the army, able to do things that other Iraqi formations, including the Hashd ash-Shaabi, simply cannot. Moreover, Iraqis know that only the United States can help them with their severe financial problems, and the billions of dollars the United States is working to get Baghdad have forced a great many Iraqi leaders to take notice.

Nevertheless, Iranian influence remains very strong, unquestionably greater than that of the United States, as American diplomats readily attest. But Iranian influence is noticeably diminished in recent months. There are reports indicating that even the Iranian-backed formations within the Hashd ash-Shaabi are not getting paid. Many Shiites question why Iraqi Hashd formations are being sent by the Iranians to Syria to fight and die for the Assad regime. Although the Hashd continue to make progress with their ethnic cleansing campaign in Diyala province (and may be trying to extend it to Salah al-Din province) they are doing poorly in Anbar. While the Americans and Iraqi Army liberated Ramadi, the Hashd have floundered at Fallujah. Iraqis know that Iran lacks the financial resources or international diplomatic clout to help Baghdad with its financial problems the way that the United States can (and is). As one indication of this shift, the billboards on display in Baghdad in 2015 thanking Ayatollah Khamene’i and the Iranian Revolutionary Guard Corps for saving Baghdad from Da’esh are gone.

An uncertain trajectory

Politically and economically, Iraq’s trajectory is currently a negative one. The country is politically fragmented at all levels and the centrifugal forces appear to be gaining strength. This, in turn, has paralyzed the government, suggesting that the most likely paths for Iraq are toward a situation analogous to the Lebanon of today, if not the Lebanon of 1975 to 1991. Moreover, there is no obvious solution from the Iraqi side, nothing out there that can currently be foreseen that seems likely to pull Iraq off its current path and put it onto a more positive and constructive one.

However, recent developments continue to suggest that the United States could serve as that much-needed catalyst to shift Iraq to a more positive trajectory, if it were willing to do so. In the past six months, a team of able American personnel with real resources at their disposal have engineered some important and unexpected changes in key areas. There is no reason to believe that they could not do more if given the opportunity and the assets to do so. The only question is whether the White House is willing to do so, or if it will once again walk away from Iraq prematurely, and leave yet another Mess-o’-potamia for its successor to clean up.